Trade secrets and patents differ greatly, but the ownership rules for them are basically the same. Therefore, as noted below, most of the discussion above applies to trade secrets as well as patents. (Learn about Trade Secret Basics.) To determine whether you own a trade secret, answer the following questions:
Have You Developed a Trade Secret?
By its very nature, the person who conceives or develops a trade secret will be its original owner. This is because this person will be the only one who initially knows about it. However, as is the case with patents, the original owner may be legally obligated to transfer ownership to an employer or client.
Unlike the case with patents, you need not be an inventor—that is, conceiver of an invention that is ultimately reduced to practice—to own a trade secret. This is because trade secret law may be used to protect a much wider array of things than patent law. Trade secret law can be used to protect inventions, whether or not they are patentable; but it can be used to protect such things as formulae, designs and specifications, methods and processes and know-how. Indeed, trade secrecy can protect any information that is generally unknown in the industry involved that provides a competitive advantage.
Moreover, unlike the case with patent ownership, it’s not necessary to reduce a trade secret to practice to own it. That is, you need not write it down or create and test it or file a patent application for it. Indeed, you’ll usually end up losing your trade secret rights if you file a patent application because the patent will be disclosed to the public (unless the patent applicant opts out of the 18-month publication rule and the patent does not issue). However, although a trade secret need not be tangible, it must be more than a vague, abstract concept. It must be something concrete that can be used by a business to obtain a competitive advantage.
Are You an Employee/Contractor?
If you are an employee or independent contractor, your employer or client may acquire ownership of trade secrets you develop through an assignment or through the same default ownership rules that apply to patents. (See this article for more details.)
Have You Transferred Ownership?
Just like patents, trade secret ownership may be transferred to others by assignment or by will.
Portions of this article are derived from What Every Inventor Needs to Know About Business & Taxes by Attorney Stephen Fishman.
For assistance with the preparation and filing of a provisional patent application, see Nolo’s Online Provisional Patent Application.